Accounting Information Systems and Financial Performance of Small and Medium Enterprises in Mombasa County, Kenya

Abstract

Manually entering and documenting everyday business transactions has become impractical; organisations have realised the usefulness of adopting accounting information systems to improve their performance. An accounting information system is a data management and processing system that provides managers with the information they need to plan, manage and run a business. The study aimed to examine the effect of accounting information systems on the financial performance of small and medium enterprises in Mombasa County, Kenya. The study's objectives were to see how record-keeping systems, financial reporting systems, budget control systems, and cash management systems affected the financial performance of small and medium enterprises in Mombasa County, Kenya. The Technology Acceptance Model, Agency Theory and Decomposed Theory of Planned Behaviour were used to drive the study. This study adopted a descriptive research design and targeted 1640 small and medium enterprises located in Mombasa central business district that have been in operation for more than five years. 268 small and medium enterprises managers/owners were chosen using stratified random sampling. Data was gathered via questionnaires. A pilot test was conducted to ensure the tool’s validity and reliability. Statistical Packages for the Social Sciences version 24 was used to analyse data using descriptive analysis and inferential statistics. Ethics were followed before, during and after the study was completed. The study concluded that there is a strong significant relationship between record-keeping systems and financial performance of small and medium enterprises in Mombasa County, Kenya. The study also concluded that a strong significant relationship exists between financial reporting systems and financial performance of small and medium enterprises in Mombasa County, Kenya. The study went further to conclude that a strong significant relationship exists between budgetary control systems and financial performance and finally a strong significant relationship exists between cash management systems and financial performance of small and medium enterprises in Mombasa County, Kenya. As a result of the clear relationships established between variables the study was able to conclude that a clear relationship exists between accounting information systems and financial performance of small and medium enterprises in Mombasa County, Kenya. The study recommends the Government to develop policies and guidelines that will encourage small and medium enterprises to adopt accounting information systems, as well as Institute of Certified Public Accountants of Kenya to offer free consultation services to small and medium enterprises on choosing appropriate accounting systems, financial management and reporting.